What is the Economic Crime and Corporate Transparency Act 2023?

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) received Royal Assent on 26 October 2023 and is now law. This will bring various changes to the role of Companies House. The aim is that Companies House will have more of a regulatory function. The ECCTA aims to tackle economic crime, preventing abuse of the register, while supporting economic growth and ease of doing business in the UK. The act will bring about the most significant changes to Companies House since it was established. 

How will this affect the Pensions industry? 

ECCTA aims to increase corporate transparency, and this will be relevant to all corporate trustees of an occupational pension scheme. New requirements apply to existing directors of corporate trustees, as well as to new appointees.

Identity verification 

The key reform which pension schemes should be aware of is that identity verification will be necessary for company directors, people with significant control, and those who file on behalf of companies. The primary way to verify identity will be for the person undergoing verification to take a photograph of their face and their identity document and provide this directly to Companies House or through registered providers to then be compared. 

In addition a company will only be permitted to retain/appoint a corporate director if all of the corporate director’s own directors are natural persons and they have been through the identity verification process.  A transitional period will apply, and we are awaiting further guidance on this. 

Failing to provide identity documents could result in criminal and civil fines and penalties. Directors that breach requirements may also be prohibited from being directors in the future. 

Registered email addresses 

As well as a registered office address, all companies, including corporate trustees, will need to have a registered email address on Companies House as of 4 March 2024 which can be supplied when existing companies supply their next confirmation statement. The address does not need to be public and is required as a contact detail for Companies House. 

New “failure to prevent fraud” offence 

The ECCTA creates a new offence, which means relevant organisations can be liable for frauds committed by employees, subsidiaries or other service providers. Corporate trustees may be caught under this as subsidiaries. 

This new offence will only apply to large organisations unless a group of companies meet two of the three thresholds. 

A defence is available if a company has “reasonable procedures” in place to prevent fraud, it is yet to be determined what is “reasonable” in this context. For trustees it will be important to ensure anti-fraud policies are in place. 

When to expect changes

The provisions of the ECCTA will be introduced in stages with the earliest coming into force on 4 March 2024. It is likely we will receive statutory guidance and regulations ahead of the ECCTA taking full affect due to the heavy burden it will have on companies. We will keep you posted on implementation over the coming months. For now, please be aware of the impacts that the ECCTA could have on your scheme and get in contact with Susannah Young if you have any questions.